Clawing Back Donor Intent After It Has Been Lost

Some cautionary examples from the experience of the Daniels Fund—one of the few foundations that managed to reclaim its donor’s intent after straying. Excerpted from “Back to Bill,” originally published in the Fall 2011 issue of Philanthropy.

Not long after the attack on Pearl Harbor, Bill Daniels was commissioned as a carrier-based fighter pilot. He flew a Grumman Hellcat in the invasion of North Africa, and a Chance Vought Corsair in the desperate battles for Guadalcanal, Midway, and the Coral Sea. He earned the Bronze Star for saving the lives of crewmates after a kamikaze attack trapped them below the decks of the USS Intrepid. In Korea, he would serve his nation once again behind the controls of a Grumman F9 Panther. Indeed, Daniels often said that it was his military service that most defined him as a person.

Daniels passed away in 2000. Two years later, the Smithsonian National Air and Space Museum sent a grant inquiry to the Daniels Fund, the $1 billion foundation Daniels had endowed upon his death, requesting funding for an educational exhibit featuring World War II aircraft. In declining the request, the program officer explained that it would be inappropriate to fund a project featuring “instruments of war.” When it was pointed out that Daniels had flown the same type of aircraft to defend the cause of freedom, the program officer nonetheless insisted that the request be declined, since the exhibit featured planes designed to “kill people.”

“It was a wake-up call,” recalls John Saeman, who was then a member of the Daniels Fund board and who later served as chairman. Saeman was one of Daniels’ best friends. He had watched as Daniels spent the final years of his life carefully defining his intentions for the philanthropy that would bear his name. After Daniels died in 2000, his estate transferred to the fund, making it one of the largest foundations in the nation. And now, two short years after its founding, the Daniels Fund seemed not to understand—at times, even to disregard—the intentions of Bill Daniels.

“We had to get into the inner workings and understand what was happening internally,” continues Saeman. “We had to make some corrections. We had to make sure people who were responsible for the grantmaking—as well as the board—knew exactly what Bill stood for and what he would have wanted to accomplish.”

That realization by the board triggered something rare, if not unique, in the annals of American philanthropy. It triggered a process of recovery and restoration, of rediscovering Bill Daniels’ intent for his foundation and instituting a process by which it would be protected in the future.

“Bill Daniels was bigger than life in this community, and the people adored him and the press loved to write about him,” explains Linda Childears, current president of the foundation. “When he died, his billion-dollar bequest to the foundation was front-page news. The community pressure was instant and intense.”

To ramp up scholarship programs, the fund sought guidance from a Washington-based organization that focuses on college access for the underprivileged. “In the early scholarship program, we knew that Bill wanted to find a certain kind of Daniels Scholar—a highly motivated young person who just needed that opportunity,” says Childears. “He was looking for a diamond in the rough. But the experts’ solution was to run a college prep program.”

Early on, a decision was made to open satellite offices in the three states other than Colorado where the Daniels Fund operated—Utah, New Mexico, and Wyoming—and to staff them with local grantmaking professionals. It didn’t take long before the satellite offices began to present challenges. “The scholarship program was handled completely differently in all four states,” says Childears. “There was no consistency, and brand integrity would have been important to Bill.”

As each of the state satellite offices undertook different approaches to grantmaking, the brand integrity issues became ever more visible. The board grew increasingly concerned that the approaches were not always aligned with donor intent. “The staff at each office considered different factors when deciding whether to fund an organization,” says Childears. “It was clear that some of the factors being considered were not ones that would have been important to Bill, who was primarily concerned about the focus and effectiveness of the organization.”

A troubling thought began to haunt the board. “It didn’t take all that long,” reflects Childears, “but all of a sudden, the Daniels Fund was starting to look like someone else’s foundation.” In 2002—two short years after the death of Bill Daniels—the board began to implement changes.

First they hired a new president. Hank Brown had known Bill Daniels for decades through Colorado politics and a mutual interest in charitable activities. The two shared similar backgrounds and values. Brown had been decorated for military service as a forward air observer in the Vietnam War, had served as a Republican member of Congress in both the U.S. House and Senate, and had served as president of the University of Northern Colorado.

“The staff was not familiar with Bill’s beliefs,” says Brown. “They had unilaterally decided to stop supporting certain organizations, disregarding entirely the fact that Bill had admired and funded those exact organizations during his lifetime.” Board member Jim Nicholson agrees: “You had a bunch of young professionals who weren’t familiar with Bill Daniels—who didn’t know him, who didn’t know his soul.”

Bill Daniels needed to be front and center at the Daniels Fund, the board decided. The first order of business was to explain—to themselves, their successors, and the world—exactly who Bill Daniels was and what he wanted to do with his money. Then they would have to create a set of institutional safeguards to keep him front and center.

The problem was not that Bill Daniels had failed to clarify his wishes. In many ways, he had made his wishes very explicit—down to the percentage of the annual payout that would go to his selected funding areas and states. But, as his board was discovering, Daniels did not leave very much guidance on the principles that should govern the foundation’s grantmaking.

Fortunately, Daniels had a long, clear history of generosity. He endowed scholarships—often in the name of a friend—at colleges and universities across the nation. He personally paid college tuition for many young people he met who were in need. He supported homeless programs, he started Young Americans Bank, and he funded the construction of the Daniels Children’s Center at the Betty Ford Center (where, in 1986, he had overcome his own addiction to alcohol).

Daniels was also clear about his wishes in his personal giving. “Very seldom did a check ever go out that didn’t have a letter with it,” says Saeman. The letter would say clearly what he was giving the gift for and why. “Bill was quite a prolific writer,” he says. “We felt confident that we had a large body of evidence to refer to, in addition to his written directions to the board.”

The board began a painstaking review of Daniels’ correspondence, speeches, and writing. It commissioned researchers to track down any and all available material. As new items became available, they were catalogued and cross-indexed. The board was determined to have as comprehensive a set of primary source documents as it could get.

“Here’s an example,” offers Childears. “In the incorporating documents, Bill said he wanted to fund ‘innovative education programs.’ Well, there isn’t a nonprofit in America that doesn’t claim to have one! It actually doesn’t give a lot of direction. So what did Bill really mean? Well, look at the second half of the sentence—‘such as charter schools and voucher programs.’ When you look into his letters and read his correspondence, it becomes very apparent what he was talking about. Basically, it was what we would call school reform.”

Another example concerns funding ethics programs at business schools. “Bill indicated he wanted to support ethics programs,” explains Saeman. “Well, ‘ethics’ is a pretty broad word. Every school in the country has an ethics program; everybody believes in some kind of ethics. But we wanted to make sure that we were supporting the kinds of ethics programs that Bill would support, not just anything that called itself an ‘ethics program.’”

So what did Bill Daniels mean by “ethics”? “We went through his files, his letters, and, just as importantly, his actions,” continues Saeman. “The board concluded that Bill was fundamentally guided by principle-based ethics. He believed that there are certain principles—man’s integrity, honesty—that are inviolable. He believed in the reality of absolute ethical principles, and the need of all people to follow them. We concluded that Bill would have wanted to fund programs that conformed to standards of right and wrong.”

“It took us a couple of years to get to the point where the whole board could say, ‘I think every word in here describes our guy,’” adds Childears. “It required us to get away from experiences we’d had and boil it down to characteristics—his style, his values, his principles.”

The result: a thorough set of documents describing who Daniels was and what he wanted to do with his money. “Preserving Donor Intent” outlines Daniels’ written instructions (in the fund’s bylaws), along with his principles and beliefs, his giving during his lifetime, and interpretive comments by the board. Another document, “Understanding the Man Behind the Daniels Fund” is longer, identifying 11 core characteristics of Daniels (such as integrity and patriotism) and pointing to examples of these characteristics in Daniels’ life, quotations from Daniels’ writings, and implications for the Daniels Fund.

Assembling these materials on Daniels and his intent was utterly necessary, the board realized, but it would not be sufficient. The documents needed to become operational, to be integrated into the legal structure and, more importantly, the culture of the Daniels Fund. “It had to start with the board establishing Bill’s intent as a matter of governance,” says Saeman. “It had to permeate the whole organization.”

The first order of business was to require all board members to acknowledge, in writing, that they had read and understood the full set of materials on Bill Daniels, and that they agreed to set aside their personal views or preferences when acting on behalf of the Daniels Fund and ensure that it fulfilled Bill Daniels’ intentions and ideals. Staff members are required to sign a similar document. To emphasize the continuing nature of this commitment, at each annual board retreat a director prepares a presentation reflecting on the donor and his purposes.

The fund makes a concerted effort to recruit employees who will honor Daniels’ intent. “It’s enormously important to get people who haven’t worked only in the nonprofit sector,” says Brown. “People who are attracted to foundation work are not typically entrepreneurs,” adds Childears, whose background before Daniels was in commercial banking.

Finally, the board instituted a new mechanism for its own succession. Board members serve a four-year term and are eligible for a second. “If your term is up and you want to run again, the nominating committee chair conducts a peer review, and then it goes to a board vote,” explains Childears. “It’s unusual, it’s not easy at all, but it does get to what we’re trying to do, which is hold each other accountable to donor intent.”

As befits a cable television pioneer, there’s a lot of video footage of Daniels. His fund’s website hosts videos of him talking about his values and principles. The fund has also commissioned a book about Daniels’ life and philanthropy, in order to reach wider audiences. Drawing on the video archive and the board’s collection of Daniels’ letters and writings, the fund produced an interactive presentation on Daniels’ life, achievements in business and public service, philanthropy, and personal values. It plays at kiosks at Daniels Fund headquarters and at places he loved and helped fund. This allows future generations of Daniels’ grantees to learn about their benefactor.

For additional information, contact David Riggs, vice president of philanthropic strategy at The Philanthropy Roundtable.